If you are like most Americans, you probably owe at least some credit card debt. Low or zero balances that you pay off monthly can be beneficial, but if you owe a lot and seem to be making little progress to pay it off, it’s time to get strategic. With options like credit card debt consolidation or simply paying more on your cards each month, there’s a strategy that can help you finally pay off those balances.
So, based on your situation, what’s the best way to pay off high credit card debt?
The first step is to decide whether you want to pay your debts quickly or by paying the least amount of interest. According to Forbes Advisor, if you want to pay off credit card debt quickly, pay as much as you can on the card with the lowest balance. After it is paid off, apply what you’ve been paying to the minimum payment of the next lowest card, and so on. This method allows you to see progress.
If, however, you are more concerned about paying high interest rates, start with paying more than the minimum balance on the credit card with the highest interest rate. After it is paid off, apply that amount to the card with the next-highest interest rate. This repayment method may take longer to see results than starting with the card with the lowest balance, but you may end up paying less in the end.
The Consumer Financial Protection Bureau suggests working with a non-profit credit counselor can be a good early move as well. A good credit counselor can help you find the a number of ways to pay off high credit card debt, often by simply adjusting your spending habits.
If you are interested in paying off debt quickly with a lower interest rate, consider credit card debt consolidation. This option allows you to merge all of your credit cards into one loan with a lower interest rate. You’ll be freed of paying multiple bills each month. You’ll also gain the ability to see exactly what you owe in one bill, and perhaps pay less in interest.
You have several options when it comes to credit card debt consolidation. If you have good credit, consider a personal or home equity loan. These repayment methods are especially helpful if you have high credit card debt with high interest rates. Over time you will pay less and pay the loan off faster than you would by simply paying on your credit cards.
Another method to consolidate debt may be a credit card with a lower interest rate. Many credit cards offer new account holders excellent rates on balance transfers. If you choose to go this route, be sure to read the fine print. Credit card issuers may raise the rate after a set period of time, putting you back into a high-interest debt scenario.
If your credit isn’t particularly good, you may consider debt settlement or debt relief services. These companies offer to work with your creditors to negotiate a lower interest rate or reduce what you owe in exchange for a one-time payment in full.
What’s the best way to pay off high credit card debt? For some it’s the way that you can pay it off the quickest and cheapest. However, really the best strategy is the one that you will stick with. Whether you choose credit card debt consolidation or working with a credit counselor, becoming free from credit card debt will give you the financial freedom to save more for retirement, a child’s education, or a new home.